Fears of Grexit as ECB may shut money supply

The European Central Bank has threatened to end its vital lending to Greek banks this Sunday upon which the economy is currently dependent.

Talks between European financial ministers and the Greek government have broken down on Saturday after creditors refused to extend repayment deadlines. The repayment of a £1.6bn debt to the IMF is due on Tuesday night.

Greek finance minister Yanis Varoufakis has called Saturday “a sad day for Europe”.

The ECB can cut its Emergency Liquidity Assistance (ELA) if it considers Greece’s banks to be insolvent. The Bank’s governing council will hold a meeting later on Sunday. If it decides to cut the lifeline, Greek banks will face serious difficulties.

Greece will probably be forced to hold a bank holiday on Monday if the Bank pulls through, the BBC reports.

French Finance Minister Michel Sapin has said that none of the 18 Eurozone countries wish for Greece to exit the currency group. Greece’s ruling Syriza party also wants the country to remain in the Eurozone, but not at all costs for its people, according to Energy Minister Lafazanis.

Lafazanis had previously said that Russia might be an alternative source of financial benefits for Greece.

Prime Minister Tsipras’s government has rejected the conditions which would guarantee the country its final bailout package which has been frozen since last summer. The conditions set by the creditors call for stricter austerity measures.

Tsipras has set a referendum for July 5th for the Greek people to vote on the bailout conditions, a measure which has angered the Eurogroup. The Greek parliament has supported the repayment plan as well as the referendum suggested by the Prime Minster.